Overpriced?

What does overpriced really mean? I've heard people complaining that certain things are too expensive: gas, Starbucks coffee, movie theatre popcorn, bottled water, new cars, healthcare, the list goes on. Perhaps you've complained about these products and services. I know I have. But when we say they are overpriced, we are not just saying that we don't want to pay that much for them but rather that no one should want to! We are calling it absurd to pay the asking price and yet many of us do it anyway! So, why do these items cost so much and why do we continue to buy them if we don't like the prices?

First, there is a common misconception about what constitutes a price. The price isn't simply the cost of production. No one would ever make anything if it costs them the same amount to produce as what they were selling for. So, most of us realize there will be a little profit for the producer in the price. But how much profit is too much? If the mark-up in movie theatre popcorn is 1200%, is the the movie theatre industry ripping off the poor consumer? Most of us would be outraged to hear this statistic. Of course that's too much profit, right? Well, what is a reasonable profit? Who decides what that profit should be? The answer: the consumer does. That is the only true cap on a producer's profits--how much the consumer is willing to pay for his product. Prices can only be astronomical if people are willing to pay astronomical prices.

But we have to buy these things and the producer is taking advantage of it, we say. We need gas. We need healthcare. For goodness sake, we need our Starbucks' latte! But do we really need these things? Have we considered the alternatives? Working closer to home so that we can walk to work? Simply not going to the doctor? Drinking, heaven forbid, instant coffee? There are always alternatives. We pay the higher price because we don't want to settle for the alternatives. As a matter of fact, most of us don't even want to consider them.

Nothing is really overpriced. We call it overpriced, because we are angry that the alternatives have such high costs. We'll save money on gas walking to work but we may have to settle for a lower paying job. We'll save a lot of money on healthcare by not going to the doctor but we may just get sick and die. And I don't even really need to go into instant coffee. Next time we start to complain about the high prices of something, let's truly consider the alternatives. They can be sobering thoughts.